Statoil's departure leaves Maine with one offshore contender

Courtesy Cianbro

The UMaine-led consortium working on a floating offshore wind turbine design, called VolturnUS, is alone in competing for a federal development grant after the Norwegian company Statoil stepped away from its Maine-based pilot project.

Another view on Statoil’s withdrawal

Val Stori, project director of the Clean Energy Group/Clean Energy States Alliance, is co-author of a commentary posted in Monday's online Huffington Post, "Offshore Wind and Japan: Will the U.S. win or lose this technology race?" Mainebiz posed by email several questions about Statoil's decision to scrap its Maine project to Stori, who spent most of Tuesday attending the American Wind Energy Association's offshore wind power conference in Rhode Island.

The following is an edited version of the email exchange:

Mainebiz: Statoil explicitly said its withdrawal was due to uncertainties created by Maine's state government. Among the reasons cited was the bill approved by Maine's Legislature that reopens an opportunity for a Statoil offshore competitor, the University of Maine-led Maine Aqua Ventus 1 pilot project, to gain a long-term contract granting ratepayer support, as well as comments from Maine's governor generally characterizing Statoil's term sheet for the Hywind pilot project as a 'bad deal' for Maine. Do these examples illustrate the take-home message of your Huffington Post commentary – namely that "public support in the form of clear and long-term policies is needed to draw developers, alleviate risk, and attract private investment"?

Val Stori: Yes, stable policy is key for driving development and attracting investors. (This was echoed at today's AWEA conference). Maine's actions do not send a strong message that Maine is open for offshore wind development and competition. That brings uncertainty to the market and makes it hard to invest in offshore wind power.

MB:With Statoil choosing not to proceed with its Hywind Maine project, that leaves Maine Aqua Ventus 1 as the sole Gulf of Maine project competing in the next round of Department of Energy offshore wind power grants. Do you have a sense of how the Aqua Ventus project might fare in the next round? Is there any risk, in your view, of the Gulf of Maine getting shut out entirely in this critical stage of offshore windpower development?

VS: I don't have a sense of how the Aqua Ventus project will fare; DOE will be discussing these proposals on Wednesday at the AWEA conference. That said, should Aqua Ventus not get the federal grant, Maine will be left behind in the race to develop offshore wind power on the Atlantic Coast. There is room for R&D pilots and pre-commercial deployment such as Aqua Ventus/VolturnUS and commercial proven technology deployment (Hywind) at the same time.

MB: Anything else you'd like to add?

VS: I would add that Statoil's pull-out is doubly devastating because its Hywind Maine pilot presented a real opportunity for U.S. developers and companies to partner with a European developer with a proven offshore wind power track record. This is important because experience in installation and project deployment is one of the key factors in driving down offshore wind power development costs and accelerate progress. [In partnering with a proven European developer] American companies could leapfrog over all the early stage technology hurdles.

Paul Williamson, director of the Maine Ocean & Wind Industry Initiative, is reluctant to characterize Statoil's decision to scrap its $120 million offshore wind project as a lucky break for the competing Maine Aqua Ventus 1 project, led by the University of Maine and a consortium of companies that includes Cianbro and Emera.

As promising as the $93.2 million Aqua Ventus project might be, he says, Statoil's Hywind Maine project also had significant merit as an investment by the world's third-largest energy company to further evaluate technology it was using in the world's first full-scale floating wind turbine located 6.2 miles off the coast of Norway.

"We don't often get opportunities like this," Williamson says. "Twice as much investment in offshore wind [in the Gulf of Maine] is twice as good."

Williamson, who is attending the American Wind Energy Association's offshore wind power conference in Rhode Island this week, says Statoil's departure from the Gulf of Maine elevates even more the importance of the U.S. Department of Energy's next round of offshore wind grants in 2014.

In the first round, projects put forward by Statoil and UMaine garnered two of the DOE's seven $4 million awards. In the next round, only three $47 million grants will be awarded over four years to advance the follow-on design, fabrication and deployment phases to achieve commercial operation by 2017. Maine now has one chance, instead of two, to be among the DOE's offshore winners.

"For better or worse, it was the competition for federal dollars that eventually drove a wedge between Aqua Ventus and Statoil," Williamson says regarding UMaine's dual involvement as a research partner in both projects. "They tried to keep the relationship going, but in the face of competition that became increasingly difficult."

Ola Morten Aanestad, Statoil's vice president of communications for North America, did not return a call seeking comment. But in an Oct. 15 statement explaining the decision to scuttle its Maine project, Statoil cited "changes in the framework conditions in the state, uncertainty around the commercial framework and schedule implications of project delays [as making] the project outlook too uncertain to proceed."

Patrick Woodcock, director of the Governor's Energy Office, says it's "disingenuous" for Statoil to pin its reasons for abandoning the Hywind Maine project largely on the state's decision to reopen the Maine Public Utilities Commission's bidding process for a long-term offshore wind power contract. UMaine submitted its bid on Aug. 30, setting the stage for a side-by-side comparison of its pilot project's ratepayer terms against Statoil's already approved $200 million, 20-year term sheet.

"Effectively, they are moving forward with a vastly different project in Scotland," he says, noting that Statoil's plans there call for 6-megawatt offshore turbines (the same size proposed by the Maine Aqua Ventus 1 project) instead of the 3-megawatt units it was planning to use in its Hywind Maine project. Worldwide, he says, the offshore wind industry is moving toward larger turbines.

"So there are a lot of factors here that obviously led to this decision," he says.

Woodcock says his preference would have been for Statoil to stick with its Hywind Maine project, and allow its merits to be evaluated by the PUC against the Maine Aqua Ventus 1 project. The PUC is scheduled to evaluate the Aqua Ventus project's ratepayer term sheet before the year's end.

"I think the way to build any industry is through competition," he says. "A comparison between the two projects would have allowed a healthy discussion of what makes sense, given a finite amount of ratepayer support that's available."

Woodcock says Gov. Paul LePage's well-publicized opposition to Statoil's term sheet was based on its higher-than-market rate kilowatt-hour price and insufficient documentation demonstrating "tangible supply chain benefits here in Maine." While it remains to be seen what Maine Aqua Ventus 1 is seeking for ratepayer support, he says its innovative use of concrete and advanced composites in its floating platform, its larger turbine size and the significant group of Maine companies that are partners in the project should be pluses in the next round of DOE funding.

"One of the factors DOE will be looking at is its benefits to the U.S. and local economy," he says. "Another big factor is how innovative the technology is, how disruptive it is [in terms of displacing earlier technology or approaches]. The university is very encouraged by the metrics DOE will be using. They see their project as scoring very well."

The stakes are clearly high. In a Huffington Post commentary posted online Monday, co-author Val Stori contrasts Japan's rapid and heavy investment in offshore wind since the Fukushima nuclear meltdown with a pointed comparison to Maine.

"Maine may have laudable goals, but they lack teeth," writes Stori, project director of Clean Energy States Alliance. "Other countries are taking offshore wind development far more seriously than the U.S. It's not too late, but the U.S needs to up its game to see offshore wind as a scalable, commercial sector."